Understanding your opportunity costs can help you make the right decision. By considering both positive and adverse outcomes, resources will be used to their maximum advantage. If you are considering taking a career-changing course to help change your path, for example, it is important to compare the amount of time that will be spent on studying with how much money can be gained.
It is also possible to avoid regrets by knowing the opportunity costs. This can be done by making sure we’ve considered our options, and then chosen the one that has the best expected return. We will know our choices are well-thought out and not emotional. Moreover, having knowledge about our opportunity cost makes us aware of any sunk cost associated with committing ourselves into something – such as upfront fees – further helping us avoid costly mistakes down the line.
In the end, knowing your opportunity cost gives you valuable insights into how to best use limited resources in order to maximize benefits and minimize drawbacks.